The global economic disruption caused due to the Coronavirus outbreak has put a dent on the private equity/venture capital (PE/VC) investments in India as well in the first quarter of the calendar year 2020. Investors put $5.9 billion – 36 per cent lower than $9.2 billion in Q1 2019 and 37 per cent lower than $9.4 billion in Q4 2019, according to the data shared by data intelligence firm Venture Intelligence. The fall is also significant with respect to the deals made. From 249 deals in Q1 2019 and 227 deals in Q4 2019, the volume decline to 164 deals in Q1 2020.
While Coronavirus started making an impact on day-to-day activities in March but, “the situation was building up before that as overseas travel etc. was getting shut even in February due to China. Before that, there were holidays in January. So things were a bit quiet. Also, investors from China were already facing this issue in January. Also, the macroeconomic situation in India was slowing down. This was also a factor in slowing down investments,” Arun Natarajan, Founder, Venture Intelligence told Financial Express Online.
OYO, Byju’s, Zomato topped the investment activity in the startup space with $500 million funding from SoftBank, $400 million investment from Tiger Global, and $150-million backing from Alibaba in the three companies respectively. Out of the total investment, decline in VC deals (seed to Series F investments in up to 10-year old businesses) was relatively less steep. VC investments in Q1 2020 stood at $1.74 billion — down by 22 per cent and 7.5 per cent in Q1 2019 ($2.21 billion) and Q4 2019 ($1.87 billion) respectively. The fall in volume to 126 deals was sharper at 36 per cent vis-à-vis Q1 2019 (196 deals) and 40 per cent compared to Q4 2019 (176 deals).
“For startups, the situation was a bit different from overall investments as these are small startups like Unacademy and not the likes of OYO, Byju’s etc. Series B and C stage funding started growing during the period even though the early-stage segment including seed and Series A funding was sort of bit slow. All this changed in March. This has been a consistent story from the same period last year wherein the volume has been coming down regardless of virus or other reasons. The deal size went up (in Q3 2019) before coming down,” said Natarajan.
Power company RattanIndia Power led the overall funding chart with $567 million fundraise from Varde Partners and Goldman Sachs. The top three sectors attracting maximum investment were IT& ITES that saw total funding of $1.83 billion followed by $1.62 billion invested in the energy sector and $716 million poured in BFSI sector.
Other startups raising maximum capital in the VC space were CureFit, Unacademy, Bounce, Digit, BharatPe, Innovaccer, MoneyTap and Rupeek from a broad set of investors such as Temasek, General Atlantic, Facebook, Sequoia, Coatue Management, Microsoft, WestBridge and more. In terms of the number of deals by sectors, fintech was the most attractive followed by healthtech and e-commerce during Q1 2020 with 19, 17, 15 deals respectively.
From the consumer behaviour perspective, once the Coronavirus pandemic ends, there would be a new normal for investments in startups. “There will be interesting business models which benefit from the current situation. There will be more investment in companies which are part of the solution to Covid-19 crisis or beneficiary from it. Otherwise, it will be more about investors saving money for the existing portfolio,” Natarajan said. Grocery and online learning are few segments tapping this situation with companies like BigBasket, Grofers, Byju’s benefitting. Byju’s, which earlier this month gave students free access to its learning programmes till April end, said that its app saw a 60 per cent increase in the number of new students within a week after the announcement. On the other hand, BigBasket and Grofers have a backlog of thousands of orders to clear as deliveries of essential goods became difficult amid lockdown.
